Jucu plant’s announced shutdown is just one of the moves made by the Nokia Corporation, which is also taking a closer look at its plants in Mexico, Finland and Hungary.
Demand for smartphones across Europe has prompted a shift in output focusing more on this type of product. The Jucu plant produces feature phones, not smartphones.
In addition, the Jucu plant faces solid competition from Asian plants, in terms of costs and efficiency. Nokia wants to move its feature phone production units closer to suppliers, which are in Asia.
According to Alin Tise, head of the Cluj county council, the company will be moving its local production operations to factories in South Korea, India and China after shutting down its Romanian unit at the end of this year.
Regarding smartphones, Nokia is taking a closer look at its manufacturing operations in Finland, Hungary and Mexico. Although they are not targeted for shutdown, these units are targeted for a change in profile, focusing on software production.
“We are seeing solid progress against our strategy, and with these planned changes we will emerge as a more dynamic, nimble and efficient challenger,” said Stephen Elop, Nokia President and Chief Executive Officer.
The planned closure of the Cluj factory combined with adjustments to supply chain operations is estimated to impact approximately 2,200 employees, the company said, adding laid off employees would benefit from severance payments.
Nokia started mobile phone production at the Jucu plant in February 2008, following an investment of EUR60 million.
In 2007, Nokia received 90 of the 159 hectares of Industrial Park Tetarom III, free of charge. In addition, the government earmarked 12 million lei (EUR2.77 million) to fund infrastructure works in this park, for the Jucu investment.
At that time, Cluj County Council President Marius Nicoara said the introduction of utilities on the 159-ha plot costs EUR33 million, and EUR10 million would come from local and county authorities. The remaining EUR23 million would come from government funds.
Earlier this year, the company said it was shutting down its Research and Development Center in Cluj, shedding about 120 employees. Nokia said at the time its plans to align its global workforce and consolidate site operations target to reduce its Devices & Services non-IFRS operating expenses by EUR1 billion in 2013, compared to 2010.
Nokia was Romania’s second-largest exporter last year, after car maker Dacia. Between January and September 2010, the company had exported products worth a total EUR750 million.
The company’s sales in Romania rose to RON6.7 billion last year, from RON4.3 billion in 2009. In 2010, the company posted revenue of RON7 billion and a net profit of RON181 million.